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Change is now: Important amendments to the Romanian Energy Law

May 2020 – On 19 May 2020, Government Emergency Ordinance no. 74/2020 amending Romanian Energy Law no. 123/2012 (the “Energy Law”) was published in the Official Gazette (“GEO no. 74”). GEO no. 74 introduces, under certain conditions, the possibility to conclude power purchase agreements outside the Romanian centralised market and maintains regulated electricity prices for households until December 2020. GEO no. 74 has entered into force as of its publication date (i.e., 19 May 2020).

Context of the amendments

The Energy Law currently limits the sales of electricity producers to trading on the competitive market in a transparent, public, centralised and non-discriminatory manner.

Romania’s National Energy Regulatory Authority (“ANRE”) has, in the past, interpreted this provision in an even more restrictive manner. As such, there have been cases where the export of electricity by producers on centralised markets in neighbouring countries was sanctioned on the grounds that all trade must be performed exclusively on the Romanian centralised market. In this respect, there is a case pending before the Court of Justice of the European Union[1] where the Advocate General is of the opinion that a national regulation imposing the obligation to trade electricity on a single platform, and therefore restricting producers from exporting electricity directly to other Member States, does not comply with Article 35 of the Treaty on the Functioning of the European Union[2].

Moreover, Regulation (EU) 2019/943 on the internal market for electricity (the “Regulation”), which entered into force on 1 January 2020, is directly applicable in all Member States and has higher legal force than the Energy Law. The Regulation provides that long-term electricity supply agreements are negotiable over-the-counter, subject to compliance with Union competition law.

The Energy Law has yet to be harmonised with the Regulation, but, in order to clarify the provisions of the Regulation, ANRE has issued Order no. 65/2020 defining a “long-term electricity supply agreement” as an agreement with a delivery period of more than one year.

Considering the above, GEO no. 74 — although it includes an exemption from producers’ obligation to trade electricity exclusively on the centralised market — does not intend to harmonise local law with the Regulation.

New amendments to the Energy Law

The rationale of GEO no. 74, as presented by the government, is to stimulate investments in energy infrastructure by allowing the conclusion of bilateral power purchase agreements and to protect household customers by introducing the necessary framework to continue the sale of electricity to households at regulated prices until the end of 2020.

The main amendments introduced by GEO no. 74 to the Energy Law are as follows:

  • by way of exemption to the obligation of trading electricity on the centralised market, electricity producers may conclude bilateral agreements outside the centralised market, at negotiated prices and in compliance with competition rules, for electricity produced by new electricity production capacities that start to operate after 1 June 2020.

As per this exemption to the Energy Law, electricity producers can now conclude power purchase agreements regarding electricity to be generated by production capacities commissioned after 1 June 2020. Such an amendment has been long requested by sector players ever since the limitations introduced back in 2012, as such agreements could be presented as guarantee instruments and help persuade financial institutions to support investments in new local power generation capacities.

  • in order to maintain the current value of regulated electricity prices to household customers until 31 December 2020, GEO no. 74 also introduces the framework allowing ANRE to adopt the methodologies on the price of electricity delivered by producers to suppliers of last resort.

Moreover, ANRE is mandated to enact secondary legislation for the application of these amendments within 30 days as of the entry into force of GEO no. 74.

Final remarks

In the context of the COVID-19 pandemic, the energy sector remains, more than ever, strategically important and capital-intensive investments will be necessary in the medium to long term to ensure both national economic recovery and that Romania meets its 2030 EU climate and energy targets.

In the absence of state support mechanisms, it remains to be seen to what extent allowing the conclusion of bilateral power purchasing agreements for electricity generated by new production capacities will lead to the new energy investments sought by the authorities.

However, additional amendments to the Energy Law can be expected soon, in order to harmonise local regulations with EU law and bring certainty to market players that are currently reluctant to rely solely on the Regulation as long as their actions would be in breach of the Energy Law.

For more information contact Iustinian Captariu, Partner, at

e-mail

, Cătălin Graure, Senior Associate, at , or Răzvan Crețu, Associate, at .


[1] Case C‑648/18, ANRE vs. Hidroelectrica SA, AG, opinion available here.

[2] Prohibiting quantitative restrictions on exports and all measures having equivalent effect).